ECO107 Economics: Assignment 1
Question 1
Consider the following statement:
“Recent hostilities between Russia and Ukraine have led to an increase in world oil prices. A pall of gloom has fallen among car manufacturers that rely primarily on sales of cars with large engines that run on petrol. Meanwhile, electric car manufacturers are quietly optimistic about their future.”
Explain, with the help of diagrams, how hostilities between Russia and Ukraine might lead to higher world oil prices and impact the markets for cars that run on petrol and electric cars.
Question 2
Suppose the government is thinking of imposing a sales tax on all brands of cigarettes. What will be the likely impact of this tax on the overall price of cigarettes and who will bear the major burden of the tax? How will your answer change if a similar tax was imposed on all brands of tea instead? Explain with the help of appropriate diagrams.